Apple settles FTC complaint over in-app sales for $32.5 million

Tim Cook told employees: "We are confident in the integrity of our company and our coworkers."

Kevork Djansezian / Getty Images

Apple CEO Tim Cook, shown at the unveiling of the iPad mini in 2012, said Apple decided to settle the FTC complaint even though it "smacked of double jeopardy."

Apple CEO Tim Cook, shown at the unveiling of the iPad mini in 2012, said Apple decided to settle the FTC complaint even though it "smacked of double jeopardy." (Kevork Djansezian / Getty Images)

Chris O'Brien

The U.S. Federal Trade Commission announced Wednesday that Apple had agreed to settle a complaint over in-app purchases by children.

Apple agreed to make changes to the way it notifies parents about such purchases as well as pay at least $32.5 million in customer refunds.

"Mobile technology has become part of our daily lives," said FTC chair Edith Ramirez. "But consumers should not have to sacrifice basic consumer protections to enjoy the benefits of new mobile technologies."

The complaint focused on how Apple notified parents about in-app purchases.

Increasingly, many apps allow users to buy various virtual goods once they've been installed on a smartphone or tablet. To make such a purchase, Apple requires a user to reenter their iTunes password for final approval.

At this point a child would have to hand the device to their parent to enter the password. What wasn't clear to many parents was that after entering their password, they were opening a window that would allow children to make additional purchases for the next 15 minutes before the password expired.

In some cases, parents said their children went on to make thousands of dollars' of additional purchases in those windows without their approval.

Under the terms of the settlement, Apple has to take steps to notify parents about the 15-minute window, but the the company doesn't necessarily have to eliminate the window.

In addition, the company is required to provide full refunds to consumers who were affected.

The FTC settlement comes several months after Apple settled a class-action lawsuit over the same issue. And because of that agreement, Apple executives felt additional action by the FTC was unnecessary and unfair.

"It doesn’t feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy. However, the consent decree the FTC proposed does not require us to do anything we weren’t already going to do, so we decided to accept it rather than take on a long and distracting legal fight."

In a news conference, FTC officials noted that their settlement with Apple went beyond the previous settlement by requiring the notification change and by not placing a limit on the amount that could be refunded to affected customers.